Nevill Boyd Maunsell: Retired bankers or Spanish bankers needed?
There is nothing about it in Sir David Walker’s ingenious report, but have you noticed who is advertising most aggressively for your money just now? Every weekend brings a new barrage of ads from Abbey, Alliance & Leicester and Bradford & Bingley.
You might imagine they were competing against each other. Not a bit of it. These contenders for your cash all belong to the Spanish Santander.
Santander, you see, has not been in trouble. Nor have the other big Spanish banks. Yet Spain has had a property crash, if anything worse than ours, and a construction crash to go with it.
Despite that, Santander and the others have been able to sail along as apparent pillars of stability in a troubled world – so far anyway.
The reason is not that Spanish bankers are wiser, more prudent, or just luckier than British bankers. It has been because Spanish law requires them to hold capital and reserves on a scale that, until a year ago, British bankers would have considered grossly “inefficient”.
Sir David’s message is that we can sort out Britain’s banking woes without Spanish practices. The ingenuity of his report is it needs no legislation, requires no activity whatever from Parliament or the Government. Given the paralysis of British politics, that is as well.
These big and necessary changes in how our banks are run and our bankers are paid are to come in as add-ons to the corporate code – the one Sir Stuart Rose is flouting at Marks & Spencer.
That can work only if the insurance companies and fund managers exert themselves to make it work. Some already take “governance” extremely seriously. Legal & General, for instance, does so because most of its funds are “passive”, locked into all the companies in a given index. It has a powerful incentive to take an interest in the way they are run. Others still take the traditional view – if you don’t like the look of a company, sell the shares and try another.
A third group are “activists”, who buy shares to make a company do something different. But that is not the same as keeping an eye on the risks a bank is taking, or whether its bonuses are sufficiently long-term. The catch with all this is maybe finding heavyweights to be non-execs, knowing that the job will involve perpetual wrangling with fund managers who may not know all that much about banking.
That is intriguing, for an aspect of Sir David’s report is future bank non-execs really should have a grasp of banking. To make sure they do, they will be interviewed by the Financial Services Authority, who may hire part-time “senior advisers with relevant industry experience” – retired bankers, but not Sir Fred Goodwin. Spanish bankers, perhaps.
n Nevill Boyd Maunsell